3 Things You Shouldn’t Pay Your Lawyer to Do
Author: Beth Lebowitz
Good lawyers do a good job of positioning themselves as a valuable resource to their clients. Growing companies are especially prone to a dependency on counsel, as their legal needs go from quarterly, to monthly, to daily. It’s no wonder many CEOs and CFOs have their attorneys on speed dial. It ostensibly reassuring when everything from advice on a contract negotiation to managing the cap table can be taken care of with one call to a trusted advisor.
The problem is, many of those needs simply should not be managed by traditional law firms. Bear with me here. Certain tasks that seem like they need to be, or at least should be handled by a lawyer actually don’t. Which means, you’re likely paying thousands of dollars a year, maybe more, on tasks that could be handled just as well, or better, for a fraction of the cost.
You might be wondering, why then does my law firm so readily agree to take care of tasks they shouldn’t bother with at all? It’s a perfectly reasonable question. The answer is simple: because they can, and you’ll pay for it. Why would they say no to something routine like filing your Delaware Franchise Tax when you’re willing to pay hundreds of dollars for their paralegal to do it? That’s just business. Remember, they live and die by billable hours. If they can achieve their quota with a few clients who have them on-demand, why wouldn’t they?
Don’t mistake what I’m saying to mean that I don’t believe law firms serve a purpose. Traditional law firms play an important role for growing companies. Transactions like financings and acquisitions, trademark and patent strategy, employment matters, and litigation all require experts in those particular areas. When you’re faced with a specific need beyond the day-to-day legal work, a law firm IS what you need. However, of all the things your law firm can do, and will do, many they should not do.
Equity management is the fancy way to describe keeping captables and financial documentation current. It’s not rocket science, and it certainly doesn’t require a law degree. The Nimbus GCs include equity management in their regular toolbox. But if you don’t have a GC, then this can be well handled by a combination of good technology and your CFO. We like Carta to manage your equity programs in a really smart, intuitive online platform. From cap tables to option pools to 409A valuations, things that your law firm does using humans and spreadsheets, is managed by software for a fraction of the price. If you have an Outsourced GC, they can make sure the data is kept up to date for you, so it’s current when you need it and out of your hair when you don’t. If you don’t have an outsourced GC, your CFO or accounting lead can handle this for you.
Document Management & Filing
Document management is tedious and often unruly. As you grow, so do your contracts, forms, governing documents, and all manner of agreements that need to be kept organized, up to date, and easily accessible. Most companies in scale mode find that their Dropbox folder is nothing short of chaos, and so they turn to their lawyers to be their document manager. This is costly and unnecessary.
Contract and document management tools, like PandaDoc, do this for you. Give your operations lead the keys to a good document management software, and you may literally cut your legal bill by thousands of dollars per year.
Again, traditional law firms serve a purpose. They are comprised of attorneys who practice specialized areas of law all day long. You might have spent a lot of time with your lawyer during your Series A round, and she did a great job of making sure the capital raise went smoothly without any legal hiccups. She might be smart as a whip and a trusted advisor, but she’s not the person to call every time a prospective new customer redlines your sales contract. Don’t pick up the phone and dial her when you’ve spaced on updating your 409A valuation, or to talk through a sticky situation with a co-founder.
This is where an outsourced GC makes the biggest difference. When you hit scale, you need that legal advisor who can guide you through the day-to-day challenges where legal intersects with business. You know it’s not economical to call your $800/hour securities attorney when a contract negotiation goes south. Yet, you also can’t go that alone due to the risk. The outsourced GC is your third option. It’s the experienced day-to-day counsel you need at a flat monthly.
We would love to talk with you, contact the Nimbus Legal Team.